The “day of the week” effect is a well-known phenomenon in financial markets, which suggests that asset returns can vary depending on the day of the week. While there is some evidence of a “day of the week” effect in the cryptocurrency market, it is important to note that this effect is not consistent across all cryptocurrencies or periods.
Unlike traditional banking and financial systems, the cryptocurrency market is active 24 hours a day, seven hours a week, without any breaks. This phenomenon adds to the volatility of the market on some days of the week based on trader activity, liquidity, and availability of banking services.
However, this does not mean that traders cannot benefit from the volatility. There are multiple ways, like arbitrage, scalping, and buying into the dip, along with range trading, that traders can strategize on to maximize their profits even on days when the market is low.
Therefore, the first step that each trader must take care of is to establish a reliable storage platform where they can securely trade, manage and strategize with their assets from anywhere in the world.
Bitcoin trading source has helped traders determine suitable strategies and potential risks according to the fluctuating markets to maximize profits and minimize loss.
How Does The Day Of The Week Affect The Cryptocurrency Market?
Several studies have looked at the “day of the week” effect in the cryptocurrency market, and the findings have been mixed. Some studies have found evidence of higher returns on certain days of the week, while others have found no significant effect.
For example, a study published in 2018 in the International Review of Financial Analysis analyzed the daily returns of seven major cryptocurrencies and found evidence of a negative “day of the week” effect, with lower returns on Fridays and Saturdays.
Why Is Crypto Volatile On The Weekend?
Cryptocurrencies often go through a dip in value on the weekends and then regain their value during the work week. This can be a result of several factors that directly or indirectly affect the crypto value. Here are a few possible reasons why the crypto market may face some fluctuations on some days of the week.
The Banks Are Closed
Even though the cryptocurrency transaction network is not tied to traditional banking systems, it is sometimes advantageous and cheaper for traders to carry out exchanges and transfers through the bank. This often saves up on transaction fees; however, since the banks are closed during the weekend, the market sees a sharp decline in the number of trades.
Loss In A Demand For Cryptocurrencies
During the weekend, with lesser traders actively working in the market, there is lesser demand for buying cryptocurrency. Due to this reason, there is a dip in the market as the potential for liquidity is minimum.
Cryptocurrency Trading Strategies On Weekends And Low Days
Here are a few top cryptocurrency trading strategies that you must make use of now!
Scalping and Dip Buying
On the weekends, it is best to carry out scalping by taking advantage of the instability of the market. Traders might also strategize and make use of the dip by buying more cryptocurrencies at a much lower value to sell at a profit once the value surges.
More experienced traders might try their hand at long-range trading and arbitrage trading to maximize profits and establish a stronger portfolio for the upcoming week. Arbitrage trading includes buying a cryptocurrency and selling the same cryptocurrency to another exchange that allows a larger profit gain. The profit of the difference gained is known as the spread and this adds to the gained profits of the trader.
In conclusion, it is important to note that the day-of-the-week effect in the cryptocurrency market is not a reliable trading strategy on its own, as the effect is not consistent and can change over time. Other strategies can be coupled together with it to make the most out of the dips. Traders should focus on using a variety of technical and fundamental analysis tools to make informed trading decisions rather than relying on a single factor, such as the day of the week.